Question

Delta72 Company received a cash advance of $700 from a customer. As a result of this event, A. assets increased by $700. B. stockholders' equity increased by $700. C. liabilities decreased by $700. D. both a and b.

Answer 1

A. assets increased by $ 700

Step-by-step explanation:

The transaction in the question gives arise to the following entry.

Cash Debit $ 700

Unearned Revenue Credit $ 700

The cash account is an asset account so the transaction results in an increase in assets.

The unearned Revenue is a liability account which increases as a result of this transaction.

The other answer options of increase in stockholders equity, or decrease in liabilities are not valid in this transaction, since the revenue has not been earned cannot impact stockholders equity. The liabilities has increased and not decreased.